German supermarket group Lidl has denied that it spied on its staff, but has admitted that it placed secret cameras in its stores.
Lidl has denied any wrongdoing
The company, which also confirmed it had employed private detectives, insisted that it carried out the measures simply to combat shoplifting.
Lidl was responding to a press report that it spied on thousands of its staff across Germany and the Czech Republic.
The article said Lidl recorded how often staff went to the toilet.
Featured in German magazine Stern, the article said that the company even monitored certain employees' love lives.
Lidl said in a statement that it was "shocked" by the accusations.
It added that it had already stopped employing private detectives and now only used visible security cameras.
"In particular, the accusation that we 'spied' on our co-workers in no way corresponds with our guiding principles and the fair way we treat our co-workers," said Lidl's head of human resources, Juergen Kisseberth.
Despite Lidl's denial, the matter is now being investigated by authorities in the southern German state of Baden-Wuerttemberg, where Lidl has its headquarters.
"The facts of the case must be cleared up," said a government spokesman.
Shop workers unions have reacted angrily to the accusations.
"These are measures I, for example, have only ever seen in totalitarian states," said Achim Neumann from the Verdi union.
"The way people's dignity has been trampled on is unparalleled in our society."
Lidl has 2,700 stores across Germany, in addition to outlets in almost every other European country.